France's broadband specialist Iliad launched its long-awaited mobile service on Tuesday with aggressive offers that sharply undercut rival operators' prices in a bid to carve out a profitable chunk of Europe's second-largest telecom market.

The French state [2]may have to accept a dividend cut to allow state-owned France Telecom[3] (Paris) to respond to aggressive pricing by Iliad [4](Paris) without penalizing its investments, French regulator ARCEP was quoted saying on Thursday.

"If the state, which is the main shareholder of France Telecom, wants this operator to keep its investments at a high level, it may agree a dividend cut. There is clearly a choice to make. It would be an important signal," ARCEP chief Jean-Ludovic Silicani told French daily Les Echos.

Iliad’s launch caps a six-year quest for its founder Xavier Niel, who had to apply twice and fight off tough lobbying from France's existing operators who did not want him to bring the low-cost, high-tech formula that Iliad honed in broadband[5]to their mobile turf.

Iliad said it would charge $25 a month for a monthly mobile phone service offer with unlimited texts, calls, as well as 3 gigabytes of mobiledata. None of its offers will have contract length requirements, Niel said in a press conference.